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Monthly Archives: April 2008

There were an interesting pair of news releases today regarding the settlement of the suit between Mesa and Hawaiian Airlines.
The settlement calls for Hawaiian to receive $52.5 million from a $90 million bond posted (in cash) by Mesa as security for the original judgment. In return Mesa will drop its appeal and get back the remaining $37.5 million of its own money.
The Hawaiian release characterized the original lawsuit as “Mesa’s misuse of confidential and proprietary information obtained during Hawaiian’s Chapter 11 plan of reorganization in 2004″. The Mesa release characterized it as a “long-running lawsuit over Mesa’s inter-island flight services operated under the go! brand name.”
Tomato, tomahto I guess.
It may see a bit odd that Hawaiian would settle for less than the $80 million awarded, but it is hard to say how long the Mesa appeal would take to run its course. Suffice to say that in today’s environment, “cash is king”, and Hawaiian is probably happier to get $52.5 million today than it is to get an unknown amount (although probably higher than zero) some time in the future. On the other side, Mesa had to $90 million hanging out in that bond and they surely do need that cash, even if HA got the lion’s share.
As for the Aloha suit, if their case is as strong as Hawaiian’s then this kind of puts a number on that asset for them.

Yours truly is delivering a keynote luncheon speech today to the Airports Council International Economic and Finance Conference. As I sit here looking out my hotel window in Broomfield Colorado, I can see snow on the Rockies. But it was last night when I flew in that was spectacular.

For those of you into photography, you’ll know what I mean when I say the light was simply gorgeous. Landed about half an hour before sunset and the golden light hitting the aircraft as they made their way out on the taxiways at DIA, or Senor Pena’s Palace of Planes, as I dubbed it a long time ago, was so striking I just had to stop and watch it play out for a bit outside the huge windows of the concourse before I schlepped on into the terminal for my bag.

Yes, I am lucky. I apparently hit Denver as it was enjoying a brief bit of spring. But today, it’s overcast once again, and I understand it’s scheduled to get colder again in the next day or two.

Hold down the Fort while I attempt to entertain the airport folks in a bit. I figure with what all that is going on in the industry now — that’s going to be a tall order.

Sources had told us that there was going to be a board meeting at Continental Airlines today. So we waited.

No news.

Finally, I made the decision that we had to go ahead and post PBB.

Figures.

We post, and not 20 minutes later, news hits that the board did, in fact, meet today, and in a follow-up note to employees, Larry Kellner has told them that the board has decided that a merger is not in the best interest of Continental at this time.

Continental executives told employees that the risks of such a deal outweigh the potential rewards.

The company says it will continue to review potential alliances and membership in SkyTeam.

Looking more and more like the scenario we outlined last week in PlaneBusiness Banter where we discussed why it was United Airlines and US Airways could do a deal together just picked up more weight.

Another airline bites the dust, as EOS, the privately-held all business-class carrier that flew between London’s Stansted and JFK has filed for bankruptcy and is flying its last flights today.

The airline, which had said earlier this month that it had closed on a deal that would bring it an additional $50 million in capital — apparently saw that deal evaporate.

Eos’s first flight took place on in October, 2005. The airline purchased three Boeing 757s and reconfigured the 220-seat planes with just 48 business-class seats, which converted into fully flat sleeping quarters.

Thanks to a reader who sent a note that gave me an excuse to stop writing about earnings.

For those looking for more details on the proposed SkyWest/XJT deal, ExpressJet has filed some information with the SEC concerning the offer from SkyWest, and more importantly, the “other” deal between SkyWest and Continental.

I only thought this was a squeeze play before I read the letter from Continental Airlines’ CFO Jeff Misner. Now– I don’t think there is any doubt.

According to Misner’s letter that was sent to CEO Jim Ream and Chairman George R. Bravante,

“First, we confirm that we have negotiated a new CPA with SkyWest, which would become effective if SkyWest is successful in acquiring ExpressJet (which, in turn, is subject to due diligence, among other things), and that we would consent to the change of control that would occur upon such an acquisition.

Second, absent our entering into a new CPA with savings of the magnitude we have negotiated with SkyWest, we currently expect to deliver to ExpressJet on June 28, 2008, a notice to withdraw 51 of the existing 205 Covered Aircraft from the current CPA, beginning in December 2009. Further, although we have the right to terminate the existing CPA at any time, we currently anticipate we will not extend the term of the current CPA (which we must do, if at all, by December 31, 2008), and thus the current CPA would simply expire in accordance with its terms beginning on December 31, 2010, with the expectation that all aircraft would be removed from the current CPA by the end of 2012.

We hope this information is helpful to you.”

Hah. Yeah, I guess it was helpful. I’d say.

Here are links to the two pertinent letters.

First letter is from SkyWest CEO Jerry Atkin to ExpressJet CEO Jim Ream and Chairman George Bravante.

Second letter is from Jeff Misner, Continental’s CFO to Jim and George.

Also for you union types, note the request for modification to the current contract between ExpressJet and its pilots. (They are represented by ALPA.)

As for my thinking on all this — it looks pretty clear. Obviously the folks at ExpressJet decided they’d go public with this all in an attempt to get a better deal. From SkyWest or someone. But given the collaboration of Continental, I’m not so sure ExpressJet has that many options.

MarketWatch is reporting that not only has SkyWest confirmed the $3.50 a share deal for ExpressJet, but that:

“The St. George, Utah-based carrier also said it has negotiated the principal terms of a new contract with Continental Airlines which is intended to become effective after a deal with ExpressJet. ‘We believe our offer is consistent with our strategy of pursuing viable opportunities to enhance shareholder value, while also offering value to Continental through a new code-share relationship,’ said Bradford Rich, SkyWest chief financial officer.”

Now, isn’t that an interesting development? So it would appear that it won’t do any good for ExpressJet to sit down and talk to Continental about a new contract, because it sounds like Continental has already negotiated what it believes to be the new contract with ExpressJet. The only hitch is that it will only go in effect after SkyWest buys ExpressJet.

I think they call this a “squeeze” play.

One thing I do know for sure. Next week is going to be hoppin’ in Houston.